Dubai Crash Causing Investor Complaints and Confusion regarding laws

As Dubai's property market crashes, more and more issues are being raised about the quality of existing developments, with owners finding broken promises by developers causing more than just financial hardships. The latest complaints are regarding Emaar's treatment of investors and unresolved maintenance. Homeowners of serviced apartments in The Address in Downtown Burj Dubai say they have complained about nearly 100 problems but none have been dealt with yet.

"I was charged fees from December 21 and I went to stay there on December 26. The apartment was open and it was filthy. We called security and housekeeping but [were told] 'sorry' and nothing more," one apartment owner said in an e-mail to Gulf News.

One owner also said there has been a 300 per cent increase in management service fees.

Emaar, which was recently downgraded by Standard and Poor, say the apartments are furnished and meet international standards. "Emaar's Quality Assurance team is working with contractors to rectify any concerns," a spokesperson said.

There has also been some confusion regarding developer Damac. Buyers of one-bed apartments in the company's Lakeside project were offered a BMW 3-series as part of a promotional deal in February.

The Free BMWs failed to materialize in Dubai

The cars were supposed to be delivered to buyers in the third quarter of 2008, but around 130 people are still waiting for their cars, said one investor.

Damac was quick to respond and requested that unhappy investors contact them directly, but there have been complaints from investors about lack of responses from direct complaints.

The government is scrambling to fix numerous issues regarding transparency in the Dubai property market and more confusion has arisen with the introduction of new laws before old laws have been properly implemented. This confusion applies to both buyers and renters.Tenants in Dubai are concerned that this year's rent cap has not yet been announced, despite the current one due to expire as we enter 2009.

Tenants are also worried that the Real Estate Regulatory Agency (Rera) will announce the new cap once rents have already been paid for next year.

"I have not seen any news on a rent cap for 2009. Is there one? Or will landlords be able to increase [rents] as they see fit?" said one tenant.

Another tenant, whose rent was increased by 17 per cent, said he prefers to keep quiet.

"My rent is still below the market price. So it's okay. Besides, the last thing I want is a hassle with the landlord," said a long-time Dubai resident, requesting anonymity. '

The rent cap in Dubai currently stands at five per cent, but some landlords have been ignoring this and happily jacking up their rents, angering tenants.

However, rent caps may not be necessary from now on as average rental rates will be decided for specified areas once Rera has finalised its rental index, which will be done when 60 per cent of tenancy contracts have been registered.

But some analysts have said that it is too premature to remove the rent cap as with the lack of mortgage facilities, rents are actually going up, not down.

Determining factor

And other analysts and tenants say it is not possible to impose an average rent for an area, as it is only the market that dictates rents.

In the meantime, Dubai's supply of rental accommodation continues to increase, with another estimated 140,000 housing units set to hit the market by 2011.

There has also been some confusion regarding the recently announced online registration site for tenancy contracts, implemented recently by Rera.

Rera unveiled its Ejari website last week, upon which it is now compulsory to register all rental contracts. While the exact cost of this registration hadn't been finalized, Marwan Bin Galita, chief executive of Rera, said it would be around Dh100 per contract.

Owners, however, say the reality is far different as owners are also obliged to take part in a training day to learn how to use the software - this must be paid for.

"I contacted Rera about the registration. They told me that I must attend the one-day Ejari training programme, which will cost Dh2,000 per person to get an online user account. Only after that can I register my property," an apartment owner told Gulf News. Rera officials were unavailable for comment on this.

Renting directly to the tenant may prove to be more beneficial as it would remove the necessity of paying an agent.

If the tenant found a property to rent through an agent, then the agent will register the contract online. If there is no agent involved, then the landlord and tenant must both sign the registration form, said Bin Galita.